Savills, the property advisor, today gave an upbeat outlook for the sector, saying that volatility in equities markets had attracted investors to bricks and mortar as it reported a 56 per cent surge in first half profits.
Chief executive Aubrey Adams told Times Online the business had been boosted by strength in investment markets and strong sales of multi-million pound London houses.
“We’ve seen a pick up on the residential side, which is now very buoyant and seeing very good volumes compared with the first half of last year,” he said.
In a bullish forecast, he said the housing market will shrug off last month’s rise in interest rates and added that another expected 25 percentage point hike before the end of the year would also make little impact.
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Chairman Peter Smith said: “Despite rising global interest rates, the general economic outlook remains positive which should provide general support for property markets.
“On this basis we are confident of achieving a good result for the full year in line with our expectations.”
The comments came as Savills reported pre-tax profits for the six months to June of £31 million, up from £20 million last year. Group revenue increased by 33 per cent to £211.1 million.
City analysts expect full-year profits of around £65 million.
The group said leasing markets in London showed signs of recovery in the first half, “particularly in the West End where a shortage of space drove rents for prime space to record levels”.
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In the City, rents also rose, driven by increasing demand from the financial sector. Leasing markets outside of London remained stable, Savills added.
However, in the retail property market, tenant demand was still restrained in the face of continuing low levels of consumer demand, it said.
Mr Smith added that markets in the Midlands and the North remain patchy. The main constraint in the strong London market was the lack of supply to meet demand.
Elsewhere, tenant demand for space in Hong Kong and China was very strong. Rents also rose for Tokyo office space beyond last year’s levels.
Savills’ consultancy business also saw good growth with revenue rising to £37.7 million from £30.1 million and operating profit of £6 million, up from £4.9 million.
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In property and facilities management, revenue was £63.1 million, up from £47.1 million, and operating profit was £3.8 million, up from £3.4 million. Fund Management revenue edged up to £2.6 million from £2.3 million but profits fell to £100,000, from £300,000.
Revenue for the Financial Services businesses was £12.1 million, up from £10.4 million a year earlier, boosted by good trading in “the high net worth mortgage broking market”. Operating profit was unchanged at £1.3 million.
During the first half of the year, Savills acquired an initial 50 per cent stake in Korean Asset Advisors and BHP Korea for a total of £8.4m. It also bought Hamilton Osborne King in Ireland for £39.6 million.
“Our continued growth strategy and our search to recruit and retain the best people may give rise to some pressure on margins in the short term,” it said.
The board hiked the interim dividend by 25 per cent to 5p from 4p last year.
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Shares in Savills gained 3p at 541p in morning trade. To track the stock click here.